By Helen Reid
LONDON (Reuters) - Shares in Britain's dollar-earning multinationals tumbled on Tuesday as sterling gained on signs a Brexit deal could be clinched sooner than expected, while Ashtead rose on results.
The FTSE 100 (FTSE) was down 0.4 percent by 0858 GMT. The index, dominated by exporters, tends to suffer from a stronger currency making their goods relatively more expensive.
Consumer goods giants were the biggest drag on the FTSE 100, taking a cumulative 14 points off the index.
British American Tobacco (L:BATS), Imperial Brands (L:IMB), Reckitt Benckiser (L:RB) and Diageo (L:DGE) were the biggest fallers, down 0.4 to 1.9 percent.
Sterling built on Monday's gains after the European Union's chief negotiator Michel Barnier said a Brexit deal could be reached in six to eight weeks if both sides were "realistic".
The currency got an extra boost after official figures showed a robust labour market with the jobless rate steady at 4 percent, its joint-lowest since 1975.
Although it dropped temporarily into the red at 0847 GMT, it then recovered rapidly to trade up 0.1 percent.
"For the FTSE it's not necessarily good news but that [pound/FTSE] relationship has been a bit flakey in the last few weeks, the one to one relationship hasn't really been all that reliable," said Ian Williams, strategist at Peel Hunt.
Topping the FTSE 100 was industrial equipment rental group Ashtead (L:AHT), up 2.6 percent after it said full-year earnings would beat its previous forecast after a 20 percent rise in first-quarter profit thanks to a stronger U.S. business.
"A strong set of results across the board with 19 percent group rental revenue growth, which in the U.S. comprised both volume and yield growth," wrote Jefferies analysts.
Ashtead said a weaker sterling had benefited its business, and said it would increase its share buyback programme.
DP Eurasia (L:DPEU) shares gained 6 percent on the small-caps index after the pizza firm reported rising profit as it hiked prices in order to keep pace with Turkish inflation after a slump in the Turkish lira.
"While macro uncertainty remains, the business is one of very high quality and managing a situation of high inflation commendably led by a management team with prior experience of such situations," wrote Liberum analysts.
AB Foods (L:ABF) fell a further 2 percent after its disappointing results weighed on the stock on Monday.
Overall, with the FTSE 100 trading at a lower valuation, analysts say the market is pricing in significant risk.
"In the short-term there is a little bit more downside risk but we're at valuation levels now where it must start to limit the downside," said Peel Hunt's Williams.